Costs
Business plan fundamentals: the one-page test a franchisee reader runs first
A one-page test shows how a franchisor, investor, verifier, and bank read the same fundamentals number, plus the obligations and sources each checks first.
What to take away
- Business plan fundamentals fit on one page: a named reader, the decision that reader makes, the number that decides it, and the source behind that number.
- A franchisor reads Item 7 and Item 19 of the franchise disclosure document first, and your royalty base must match what the franchisor reports.
- A bank credit officer tests repayment, collateral, equity, and support, in that order.
- Anything a reader cannot verify in ten minutes reads as a claim rather than a fact.
- Obligations belong on the pageterm, minimum payment, personal guarantee, and exit cost.
Why the fundamentals page stays on one page
The page answers four questions in order. Who reads this plan. What decision that reader makes. What single number drives the decision. What evidence proves the number. A full plan expands this page. It does not replace it.
The real test is time. Give the page to someone outside the business and allow ten minutes. If that person cannot repeat your lead number, its unit, and its source, the page fails. Length hides weak numbers instead of fixing them.
For a franchisee, the first reader is the person writing the page. Before a franchisor or a lender sees it, the franchisee opens Item 7 of the franchise disclosure document, the estimated initial investment, which breaks out the initial franchise fee, training, real estate and leasehold improvements, equipment, opening inventory, advertising and grand-opening costs, and working capital, with a total at the bottom. Item 6 gives the royalty and advertising-fund rate the page has to carry, and Item 20 shows how many outlets opened, closed, and transferred, which is the check on any growth assumption.
Four readers, four first numbers
| Reader | Opens first | Deciding number | Proof accepted |
|---|---|---|---|
| Franchisor | FDD Item 7 and Item 19 | Royalty base and unit margin | Franchisor performance representation plus your model |
| Investor | Executive summary | Cash needed to reach the first positive month | Signed contracts, quotes, bank records |
| Verifier | Financial statements | Any figure without a source | Invoices, leases, tax filings |
| Credit officer | Repayment schedule | Debt service coverage | Tax returns, collateral, equity injection |
Franchisor. The reviewer opens Item 7 for the estimated initial investment and Item 19 for any financial performance representation. Your royalty base has to match the base the franchisor reports. Item 20 shows outlet counts and turnover, which is where optimistic models get caught. This overview of franchising disclosure and regulation explains the framework.
Four readers, four first numbers
Franchisor
- Opens first
- FDD Item 7, 19
- Deciding number
- Royalty base, margin
- Proof accepted
- Performance representation
Investor
- Opens first
- Executive summary
- Deciding number
- Cash to first month
- Proof accepted
- Contracts, quotes, records
Verifier
- Opens first
- Financial statements
- Deciding number
- Figure without source
- Proof accepted
- Invoices, leases, filings
Credit officer
- Opens first
- Repayment schedule
- Deciding number
- Debt service coverage
- Proof accepted
- Tax returns, collateral
The royalty base and the unit margin are where most drafts break, and the fix is covered in what changes when a franchisor reads the plan. In the United States, the FTC Franchise Rule requires delivery of the disclosure document at least 14 calendar days before a binding agreement or payment.
Ontario franchisees answer to a provincial statute instead, the Arthur Wishart Act (Franchise Disclosure), 2000. Disclosure timing differs by jurisdiction, so confirm which rule applies to your unit.
Investor. An investor can price, stage, or refuse the money. That power moves proof to the top of the page and pushes ambition down. Read what changes for an investor before you draft the summary.
Verifier. A verifier opens the file behind each number. If the source is a supplier email from last year, the number is dated. This walkthrough of what a reader can verify shows how much ground ten minutes covers.
Credit officer. Repayment comes first, then collateral, then equity, then any outside support. Start with the one reader and one decision before you reshape sections.
The one-page test, step by step
The one-page test, step by step
- Name the reader and decision
- Put deciding number in first three lines
- Show source and date beside it
- List inherited obligations and exit cost
- Add line for 20 percent miss
- Time an outsider's first read
- Name the reader.One reader, not a crowd: the franchisor who approves the unit, the investor who wires the money, the verifier who checks the file, or the credit officer who funds the loan.
- Name the decision.Write what that reader can do after ten minutes with the page: approve, invest, verify, or decline.
- Name the lead number.One figure with a unit, such as monthly unit margin after royalty and debt service, never revenue on its own.
- Put the proof beside it.Name the document behind the number and the date on it: the franchisor's Item 19 representation, a system or point-of-sale report, tax returns, bank statements, supplier invoices, payroll records.
- Add the obligations.Term, minimum payment, personal guarantee, exit cost, and the royalty and advertising-fund rate from Item 6.
- Run the test.Hand the page to someone outside the business, allow ten minutes, and ask for the lead number, its unit, and its source back.
Example: one page read by a franchisor and a bank
One template sentence survives both readers:
One line, two reviews
- Template sentence with payment, month, base, margin, source
- Franchisor reads it as royalty calculation
- Checks base against disclosure document
- Credit officer reads it as repayment schedule
- Checks margin against tax returns
- Mismatched years stop both readers
Payments of [monthly debt service] begin in month [n], covered by [sales base] at [operating margin], per [source and date].
Each bracket takes the figure and the dated document behind it; a bracket without a date is a number the reader cannot use.
A franchisor reads that line as a royalty calculation and checks the base against its franchise disclosure document. A credit officer reads it as a repayment schedule and checks the margin against tax returns. One line, two reviews. If the numbers behind it come from different years, both readers stop.
Where the page breaks
- Lead number is revenue rather than margin.
- Royalty base differs from the base used in Item 19.
- Debt service appears without a start month.
- Guarantee and term sit on page nine.
- The source for the lead number carries no date.
On the debt side, SBA 7(a) loans cap at $5 million and the 504 program pairs a bank loan with a certified development company debenture. Both routes ask for the same repayment logic on the fundamentals page.
The longer plan still needs the standard sections, and the SBA guidance on writing a business plan lists what lenders and partners expect to find.
Canadian borrowers on a lender administered loan also answer to the Canada Small Business Financing Act, which sets eligible costs and how losses are shared.
